needs to regain lost credibility
outcome of the insider dealing investigation at the Securities and
Exchange Commission turns out to be, a number of issues highlighted
by the fiasco needs to be addressed and sorted out if the watchdog
body is to regain its lost credibility and investors are to regain
confidence in the regulators ability to protect their interests.
It is the investing
public that it being asked to take the risk of putting their hard-earned
money into the stock market from which listed companies can access
relatively cheap funds. It is only natural that they follow this
whole affair with keen interest and become wary of the market if
regulators are not allowed to do an independent job in taking action
against those breaking the law.
of the Attorney General on the second opinion given by a so-called
independent team on the SEC investigation and the AG Department's
original advice that there was a prima facie case against the accused
was being awaited at the time this comment was being written.
One of the
fundamental concerns that have arisen from this fiasco is the manner
in which the normal procedure or practice at the SEC has been violated.
Many questions are being raised about the violation of the usual
process adopted in such investigations. In the past the SEC has
prosecuted or compounded offences against market players accused
of breaking the law, based on the AGs advice subsequent to its investigations.
In this probe the SEC's own chairman, and other ex-directors of
Aitken Spence accused of the same crime, were given the privilege
of a second opinion and allowed to present their case to the state's
legal advisor, a privilege not granted to other accused in previous
inquiries. The SEC Commissioners owe an explanation to the investing
public why this was done.
of one of the Commissioners, Nihal Jinasena, acting as the chairman,
following the leave of absence taken by Michael Mack, is also in
question. After all, Finance Minister K.N. Choksy has not formally
appointed him the acting chairman as he is required to do under
the SEC Act. Why was this not done?
is the secretive manner in which decisions regarding the investigation
were taken, such as the appointment of the two-member panel that
gave the so-called independent opinion on the AG's advice.
There is also
the potential conflict of interest concerning those Commissioners
who are, or were, serving in audit firms that audited the accounts
of companies being investigated by the SEC in this case the Aitken
Spence group and its garments subsidiary. This has highlighted the
need to appoint to regulatory bodies such as the SEC, people with
either no shareholdings or, if that is not practical, for appointees
to disclose their share portfolios and to refrain from any trading
during the period of their service. Another financial markets, agency
is considering a proposal of appointing independent directors to
its board. Perhaps it is time for the SEC to do the same. Those
involved in the financial markets reforms did in fact make such
recommendations to prevent potential conflicts of interest at regulatory
bodies, audit companies and rating agencies. One such suggestion
was that anyone appointed to the Board of the SEC should give up
their duties in other institutions that would constitute a conflict
of interest. The market itself has reacted coolly to the crisis.
But the strange and tortuous twists and turns the whole affair has
taken only serves to highlight the prevalence of the old boy networks
and the incestuous ties that bind many a corporate bigwig to each
other behind the scenes in our business world.
may force lawyers to spill clients' beans
NEW YORK: (Reuters)
Despite a high-powered lobbying campaign by corporate lawyers, the
Securities and Exchange Commission is moving towards approving a
new regulation that some lawyers say would compel them to blow the
whistle on clients, The Wall Street Journal reported recently.
of five commissioners is currently leaning towards instituting some
form of 'noisy withdrawal' requirement, according to people familiar
with the matter.
That rule would
require a lawyer who sees evidence of a client company committing
a 'material' securities-law violation and is unable to get the company's
board to stop it, to quit and inform the SEC that he is quitting
for "professional considerations".
which arose from last year's wave of corporate scandals, has elicited
a chorus of criticism from law firms, bar associations and corporate
lawyers, who contend that it would severely damage the attorney-client
a target on your client," says Lawrence J Fox, a Philadelphia
securities litigator who has represented lawyers accused of wrongdoing.
a dramatic breach of confidentiality.
It would make
the lawyer into a regulator."
the SEC to enact a new professional-conduct rule for lawyers in
last year's Sarbanes-Oxley Act, which called for stricter rules
to enforce corporate governance.
The most controversial
of a long slate of regulations required by the bill is a directive
to adopt rules "setting forth minimum standards of professional
conduct for attorneys" practising before the SEC.
Congress said, should require outside and company lawyers to report
"evidence of a material violation" of securities laws
by a company "up the ladder" to senior executives or the
to offer Comex solutions
DMS Electronics (DMSE) last week announced its partnership with
Comex Genesys to offer card-based payments solutions to the local
banking and finance industry recently.
General Manager of DMSE said that this is a timely partnership as
the plastic opportunity is expected to grow ten-fold over the next
five years. He also noted that the improvement of the economy and
the peace efforts will reflect a growth in tourism for which the
infrastructure to acquire credit cards should also be in place,
as there will certainly be growth in card transactions.
is considered to be a leading Asian solutions provider for card
payment solutions. It offers a series of solutions for card processing
that cover consumer, debit, private label and virtual cards; and
automating of cash payment and cash collection processes.
said the new product was tied to the governments e-Lanka initiative,
aimed at ensuring IT reaches all sectors of Sri Lankan society including
Chief Executive Officer of Comex Genesys said that there is immense
potential for growth in credit cards in the Sri Lankan market based
on the experiences of Singapore and Malaysia. He added that the
partnership is also important for some of the Sri Lanka initiatives
as the online merchants would need the infrastructure to receive
payments and deliver goods.
of the partnership is also timely as Sampath Bank, which has been
a customer of Comex solutions from its early versions over a 14
year period renewed its licence for an upgrade to the latest version
of Comexs Credit Card processing solution. Ranjith Narangoda, Assistant
General Manager, Card Centre and Systems Development at Sampath
Bank said that the upgrade was required as the bank plans to expand
its present 35,000 credit card customer base.
The two companies
also organized a CEO Breakfast Meeting and Payments Forum to present
strategies on Trends in Financial services and Technology. Two other
leading business partners Hewlett Packard and Oracle also contributed
to the forum. The local corporate leaders were presented with best
practices for managing profitability of credit card and payments
Comex Genesys also has offices in China, Japan, Malaysia, and Taiwan
providing solutions for cards and payment processing. Its major
shareholder includes Visa International.DMS Electronics Ltd is a
well-established solutions integrator and has been providing the
local banking and finance industry solutions in card based transaction
processing technology for the last 20 years. (AA)
deficit widens in November
The trade deficit
widened in November despite an increase in exports, which was supported
by improving performance of textiles and garments, and other industrial
exports, the Central Bank said in a statement last week.
are excerpts of the statement:
in dollar terms increased by 9% in November, 2002 in comparison
to the performance in November, 2001. Expenditure on imports measured
in dollar terms also increased by 9% in November, 2002. However,
the absolute increase in export earnings was not sufficient to cover
the increase in the import bill and hence the trade deficit widened
to $156 million in November 2002 compared to the deficit of $144
million in November, 2001. Meanwhile, the foreign exchange market
remained liquid, reflecting increasing inflows under the services
and capital accounts, which were more than sufficient to cover the
trade deficit. Consequently, the Central Bank was able to purchase
foreign exchange from the market and further build up official external
export earnings during the first eleven months of 2002 in comparison
to those in the corresponding period in 2001 declined by 5%, recording
a gradual reduction in the rate of decline observed in the earlier
part of the year. As at June 2002, the cumulative decline in export
earnings was at a peak of 17%, but this fell to 8% by the end of
the third quarter, and finally to 5% as at November, 2002. Meanwhile,
the cumulative imports declined by 1.5% during the first eleven
months of 2002. The larger drop in exports than in imports has caused
the trade deficit in the first eleven months of 2002 to increase
by 12% to $ 1,274 million, compared with a deficit of $1,136 million
recorded during the first eleven months in 2001.
in November, 2002 were $378 million, compared with $346 million
in November, 2001.
export earnings during the first eleven months of 2002 were $4,204
million, compared with earnings amounting to $ 4,426 million recorded
during the corresponding period in 2001.
textiles and garment exports increased by 3% to $184 million in
November, 2002. This was the combined effect of a 5% increase in
the unit price and a 2% decline in the volume.
exports together increased by 30% reflecting higher exports of machinery,
mechanical and electrical products (54%) rubber based products (19%),
diamonds (50%), petroleum products (22%) and plastic (6%). However,
declines in export earnings were recorded in chemical products 0
(-14%) travel goods (-47%) and footwear (-9%).
agricultural products decreased by 5% in November, 2002 due to the
decrease in the export of tea. Despite higher prices, earnings from
tea at $55 million recorded a decline of 10% in November 2002 due
to the lower export volume.
on imports at $534 million was an increase by 9% in November, 2002
compared to imports of $491 million in November, 2001.
expenditure on imports during the first eleven months of 2002 was
$5,478 million, a decline of 1.5 % over the first eleven months
The import of
consumer goods increased by 21% in November, 2002. Within this category,
food imports recorded an increase of 18%. However, wheat imports
decreased by 53% compared to imports of November, 2001. Imports
of non-food consumer goods increased by 25% mainly reflecting increases
in motor cars and cycles, radio receivers and TV sets, over November,
2001. Intermediate goods imports increased by 20% due to higher
imports of fertilizer, petroleum, products, chemical elements and
compounds, dyes and colouring materials, paper and paper products,
on textiles imports remained at the previous year's level.
goods imports, increased by 8% due to high imports of building material
and transport equipment.
signs exclusive deals with Maersk, APL
The Sri Lanka
Ports Authority has clinched terminal services agreements with the
world's largest container carrier, Maersk Sealand, and American
President Line (APL) under which they will exclusively patronise
the Jaya Container Terminal for a period of two years.
and future services operated by Maersk Sealand and APL through the
Port of Colombo will be handled at SLPA container terminals, the
Under the Terminal Service Agreement with Maersk Sealand the carrier
has committed an annual volume of 125,000 transshipment containers
and 40,000 domestic containers.
that the SLPA would derive from a domestic container is about four
times greater than handling a transshipment container, the SLPA
said in a statement.
It quoted Jan
Thorhauge, Managing Director of Maersk Sealand as saying: "We
are very impressed with the dynamic, proactive leadership at SLPA/JCT
and also we are pleased to see JCT sustaining the changes brought
in over the last 12 months."
The SLPA statement
quoted Maurice Mackeating, managing director of APL in Sri Lanka
as saying, "Our decision to exclusively patronise Sri Lanka
Ports Authority terminals was based on the productivity and efficiency
gains achieved at JCT combined with the customer oriented outlook
of the chairman and the management team."
and operated by Neptune Orient Lines of Singapore, owns a fleet
of 71 container ships with an annual shipboard capacity of 227,749
owns a container fleet of 312 vessels with an annual shipboard capacity
of 773,931 TEUs (Twenty-foot equivalent units).
carrier was a big customer of Colombo Port until the late 1990s
when it switched most of its transshipment volumes to the new container
port in Salalah, Oman, in which the line has an equity stake, partly
owing to capacity constraints and inefficiency at Colombo.
The line, which
handled 337,000 TEU at Colombo in 1998, handled only 74,500 TEU
seen reviving on results
stock market ended lower last week dragged down by a fall in Sri
Lanka Telecom shares, the stock with the largest market capitalisation
on the bourse, but brokers said they expect prices to recover when
quarterly results start flowing in by next week.
its size, a slight decline in the SLT price would have a big impact
on the index.
were heavily traded with retailers who bought in the IPO selling
them owing to perceived uncertainty about the peace process following
news of LTTE ceasefire violations.
SLT sank to
almost Rs 13 on Friday, below its issue price of Rs 15, on retail
The All Share
Price Index, which opened on Monday at 838.7, declined and closed
at 813.19. The sensitive Milanka Index followed the same trend,
opening the week at 1395 and ending at 1388.74. The top gainers
of the week were HNB, CIC and AMW.
The All Share Price Index could reach 900 points as the third quarter
results of most companies are released, brokers said.
AMW was the
pick of the week. The stock shot into the limelight on reports of
buying by a strategic investor and has been subject to heavy trading
between Rs 45 and Rs 60.
AMW is set to grow in the future with its steady earnings and expansion
to the north and east by capturing the re-conditioned vehicle market
With the interest
rate cuts, major bank stocks such as HNB, Seylan and Sampath went
a DSA Securities spokesman, the banks made capital gains from Treasury
bonds as a result of interest rate cuts.
its earnings figures for the third quarter and the stock rose by
almost Rs 8 and finished at Rs 95.
foreign investors who invested large sums in the CSE on a medium
term basis as hope for peace rose in the country last year would
hold on to the stocks since the market is seen picking up in February-March.
Last year the
Colombo Stock Exchange became one of the best performing stock markets
in the world, moving up by an impressive 31 percent when most of
the other stock markets faired badly.
investment for the year amounted to Rs 2.4 billion, the second highest
net foreign inflow recorded in the history of the CSE. (DM)